What is a Deed of Variation?
If you have recently received an inheritance, you may be able to redirect all or part of that inheritance to other people. This can be achieved through a Deed of Variation. You can redirect your inheritance to anyone you want. It does not matter if the deceased left a Will or if you inherited under the intestacy rules (i.e. where there is no Will).
You may wish to redirect your inheritance to:
- reduce the amount of inheritance tax or capital gains tax due in the deceased’s estate
- provide for someone who was left out or pass assets on to your children
- avoid swelling your estate for inheritance tax purposes
- pass the deceased’s assets into a trust
- clear up any uncertainty over the deceased’s Will
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Frequently Asked Questions - Deeds of Variation
Can you give some examples of when a Deed of Variation might be used?
Here a few examples of when a Deed of Variation might be used:
- A grandmother leaves her estate equally between her two sons. Her eldest son does not need the money and would rather see his children benefit. He signs a Deed of Variation and passes his inheritance to his children to help them move up the property ladder.
- A couple have been cohabiting for many years, but do not make Will. When the man dies his estate passes equally under the intestacy rules to his two children. To avoid his partner making a claim against his estate, his children sign a Deed of Variation to provide for the partner with a place to live for the rest of her life.
- A mother of three falls out with one of her children. She changes her Will months before her death to split her estate between her other two children. After her death, the two children benefiting under her Will both agree that the third child should also receive an equal inheritance. They sign a Deed of Variation so that the estate is divided into three equal parts.
Are there conditions to a Deed of Variation?
- To secure the inheritance and capital gains tax advantages, the Deed must be signed within two years of the deceased’s death.
- All of the beneficiaries affected by the redirection must agree and sign the Deed.
- Those beneficiaries must be over the age of 18. If the variation affects a minor child’s inheritance, the court must approve the redirection.
- You cannot receive a benefit or be compensated for agreeing to vary your inheritance.
Can you do a Deed of Variation before Probate is granted?
A Deed of Variation can be prepared before or after obtaining the Grant of Probate. However, to obtain the inheritance and capital gains tax advantages it must take place within two years of the deceased date of death.
Does a Deed of Variation avoid inheritance tax?
A Deed of Variation can help to reduce the amount of inheritance tax due in the deceased’s estate, if the redirection means that the estate will qualify for additional inheritance tax reliefs or exemptions.
The Deed of Variation may also help to minimise the potential inheritance tax liability of the original beneficiary. For example, if the original beneficiary is already likely to face a large inheritance tax bill on their death, they may wish to redirect the inheritance under the deceased’s estate to someone else or into a trust.
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